Alpine Air Express, Inc. - The condensed consolidated financial...

Alpine Air Express, Inc. - Recent Material Event

Item 1. Financial Statements.

The condensed consolidated financial statements of Alpine Air Express, Inc., a Delaware corporation, and its subsidiary Alpine Aviation, Inc., a Utah corporation, as required to be filed with this 10-QSB Quarterly Report were prepared by management, and commence on the following page, together with related notes. In the opinion of management, the financial statements present fairly the consolidated financial condition, results of operations and cash flows of Alpine Air for the periods presented.

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2008

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS


	PAGE
— Unaudited Condensed Consolidated Balance Sheet at July 31, 2008	4
— Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended July 31, 2008 and 2007	6
— Unaudited Condensed Consolidated Statements of Cash Flows, for the nine months ended July 31, 2008 and 2007	8

Notes to Unaudited Condensed Consolidated Financial Statements	10

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

ASSETS


	July 31, 2008
CURRENT ASSETS:
Cash and cash equivalents	$	263,302
Trade accounts receivable, net		1,936,013
Inventories		1,703,595
Prepaid expenses Income Taxes Receivable		1,137,943 48,433
Deposits		62,811
Deferred tax asset, current		144,771
Total Current Assets		5,296,868

PROPERTY AND EQUIPMENT, net		16,299,578

OTHER ASSETS		175,000

DEFERRED TAX ASSETS, long-term		369,741

	$	22,141,187

^[^Continued^]

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

[Continued]

LIABILITIES AND STOCKHOLDERS' EQUITY


	July 31, 2008
CURRENT LIABILITIES:
Trade accounts payable	$	532,937
Accrued liabilities		879,961
Deferred Revenue		12,323
Dividends Payable Deferred Gain on Sale of Assets		24,254 139,679
Current portion of notes payable		1,439,595
Total Current Liabilities		3,028,749


NOTES PAYABLE, net of current portion		4,883,569
Total Liabilities		7,912,318
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, $9.104 stated value, 1,000,000 shares authorized, 880,000 shares issued and outstanding, net of discount		7,742,180
Common stock, $.001 par value, 100,000,000 shares authorized, 36,271,461 shares issued and 36,200,801 shares outstanding		36,271
Additional paid-in capital Treasury Stock		2,350,103 (31,797)
Retained earnings		4,132,112
Total Stockholders' Equity		14,228,869
	$	22,141,187

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	For the Three Months Ended July 31,				For the Nine Months Ended July 31,
	2008		2007		2008		2007
OPERATING REVENUE:
Operations	$	4,995,883	$	4,368,925	$	14,337,676	$	13,555,158
Public services		106,298		72,293		129,939		144,159
Total Operating Revenues		5,102,181		4,441,218		14,467,615		13,699,317
DIRECT COSTS:
Operations		4,454,097		3,003,344		11,649,836		9,159,247
Public services		90,401		52,479		106,888		98,899
Total Direct Costs		4,544,498		3,055,823		11,756,724		9,258,146
Gross Profit		557,683		1,385,395		2,710,891		4,441,171
OPERATING EXPENSES:
General and administrative (Gain) loss on disposal of assets		420,367 150,149		471,392 -		1,073,144 (504,060)		1,366,542 (386,773)
Total Operating Expenses		570,516		471,392		569,084		979,769
Operating income (loss)		(12,833)		914,003		2,141,807		3,461,402
OTHER INCOME (EXPENSE):
Interest income		10,627		9,599		39,077		31,258
Interest expense		(150,666)		(155,663)		(477,671)		(444,172)
Total Other Income (Expense)		(140,039)		(146,064)		(438,594)		(412,914)

INCOME (LOSS) BEFORE TAXES AND PREFERRED STOCK DIVIDEND		(152,872)		767,939		1,703,213		3,048,488
Current income tax expense (benefit)		-		868		-		868
Deferred income tax expense (benefit)		(44,401)		353,437		452,349		1,209,535
INCOME (LOSS) BEFORE PREFERRED STOCK DIVIDEND	$	(108,471)	$	413,633	$	1,250,864	$	1,838,085

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

[Continued]


	For the Three Months Ended July 31,				For the Nine Months Ended July 31,
	2008		2007		2008		2007
Preferred Stock dividend declared and
Amortization of preferred stock discount analogous to a preferred stock dividend of a Subsidiary		-		-		-		(655,000)
NET INCOME (LOSS)	$	(108,471)	$	413,633	$	1,250,864	$	1,183,085
Preferred Stock dividend declared and Amortization of preferred stock discount analogous to a preferred stock dividend		(312,762)		(327,500)		(950,349)		(327,500)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS	$	(421,235)	$	86,133	$	300,515	$	855,585
NET INCOME (LOSS) PER COMMON SHARE
Basic	$	(.01)	$	0.00	$	.01	$	0.02
Diluted	$	(.01)	$	0.00	$	.00	$	0.02

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Nine Months Ended July 31,
	2008			2007
Cash flows from operating activities:
Net income (loss)	$	1,250,862	$		1,183,085

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Realized gain on sale of fixed assets		(504,060)			(386,773)
Deferred tax expense (benefit)		452,350			1,209,535
Depreciation and amortization		1,602,371			1,403,757
Change in allowance for bad debt		-			6,912
Non-Cash Items		-			256,203
Preferred Stock Dividends and related amortization		-			655,000

Changes in operating assets and liabilities:
Trade accounts receivable		72,695			127,274
Trade accounts receivable - related party		-			-
Inventories		(319,255)			(169,599)
Income taxes receivable		(18,333)			(149,604)
Deposit		(52,681)			-
Prepaid expenses		(580,609)			33,209
Trade accounts payable		(367,646)			(1,192,250)
Accrued expenses		295,453			66,207
Deferred gain amortization		(131,046)			(131,046)
Deferred Revenue		(4,669)			172,512
Total adjustments		444,570			1,901,337
Net cash provided by (used in) operating activities		1,695,432			3,084,422

Cash flows from investing activities:
Proceeds from sale of property and equipment		1,882,800			556,900
Purchase of property and equipment		(1,978,414)			(1,861,246)
Other assets		80,000			-
Proceeds from return of deposits		-			(6,360)
Net cash provided by (used in) investing activities		(15,614)			(1,310,706)

Cash flows from financing activities:
Payment on notes payable		(915,024)			(4,802,667)
Payment on notes payable - related party		-			(2,699,125)
Line of Credit Increase		-			(98,000)
Proceeds from Notes payable Payment for redemption of Preferred Stock Payment for purchase of Treasury Stock Payment of Dividends Payable		- (1,092,480) (31,797) (486,043)			6,000,000 - - -
Net cash provided by (used in) financing activities		(2,525,344)			(1,599,792)

Net change in cash and cash equivalents		(845,526)			173,924

Beginning cash and cash equivalents		1,108,829			506,036

Ending cash and cash equivalents	$	263,302	$		679,960

[Continued]

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

[Continued]


	For the Nine Months Ended July 31,
	2008			2007
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	440,394	$		446,117
Income taxes	$	-	$		-

Non-cash investing and financing activities:

For the nine months ended July 31, 2008:

The Company had preferred dividend expense of $950,349 which is comprised of $411,670 in preferred dividends and $538,679 of amortized discount on preferred stock analogous to a preferred stock dividend

For the nine months ended July 31, 2007:

The Company had preferred dividend expense from a subsidiary of $655,000 which is comprised of $295,880 in dividends and $359,120 of amortized discount on preferred stock analogous to a preferred stock dividend. The Company also had preferred dividend expense of $327,500 which is comprised of $147,940 in dividends payable and $179,560 of amortized discount on preferred stock analogous to a preferred stock dividend

In December 2005 the Company issued 2,845,467 shares of common stock for services to be rendered over a 2-year period. The stock was valued at $521,668 or approximately $0.1834 per share. The Company has received services to date valued at $456,459.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Alpine Air Express, Inc. and subsidiary (the "Company") is presented to assist in understanding the Company's financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America (USGAAP) and have been consistently applied in the preparation of the condensed consolidated financial statements.

Organization and business description - Alpine Aviation, Inc. (Alpine) was incorporated in the state of Utah on October 7, 1975. On June 12, 2000 Alpine entered into a transaction that was accounted for as a reverse merger with Riverside Ventures, Inc., a Delaware corporation incorporated on April 20, 1994. At the time of the transaction, Riverside Ventures, Inc. was inactive. All of the outstanding common stock of Alpine was exchanged for 29,685,000 shares of common stock of Riverside Ventures, Inc. The transaction, accounted for as a reverse acquisition, resulted in a recapitalization of Alpine, inasmuch as it was deemed to be the acquiring entity for accounting purposes. Riverside Ventures, Inc. changed its name to Alpine Air Express, Inc. The Company is an air cargo operator, transporting mail, packages and other time-sensitive cargo between cities in the western portion of the United States.

Principles of consolidation – The condensed consolidated financial statements include the accounts and operations of Alpine Air Express, Inc., and its wholly-owned subsidiary Alpine Aviation, Inc. as of July 31, 2008 and 2007 (together referred to as the Company). All material inter-company transactions and accounts have been eliminated in the consolidation.

Condensed Financial Statements – The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at July 31, 2008 and 2007 and for the periods then ended have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s October 31, 2007 audited financial statements. The results of operations for the periods ended July 31, 2008 and 2007 are not necessarily indicative of the operating results for the full year.

Cash and cash equivalents - The Company considers demand deposits at banks and money market funds at other financial institutions with an original maturity of three months or less to be cash equivalents. At July 31, 2008, the Company had cash balances in excess of federally insured limits in the amount of $263,188.

Other assets - At July 31, 2008, the Company had two restricted cash time deposits totaling $175,000 held as collateral for debt of a third party and is included in other assets. (See Note 5)

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]

Trade accounts receivable - The Company grants credit to its customers, substantially all of whom are businesses located in the United States. The Company does not require collateral on any of its trade accounts receivable.

Inventories - Inventories consist of aircraft parts and fuel stated at the lower of cost or market, determined using the first-in, first-out method (FIFO).

Property and equipment - Provision for depreciation for financial reporting purposes of property and equipment is computed on the straight-line method over their estimated useful lives ranging from 3 to 40 years. (See Note 5)

Maintenance, repairs, and renewals, which neither materially add to the value of the property and equipment nor appreciably prolong the useful lives are charged to expense as incurred. Gains and losses on dispositions are included in operations.

Engine overhauls - The Company uses the deferral method of accounting for our major engine and airframe component overhauls and which provides for major engine and airframe component overhaul costs to be capitalized and depreciated over the estimated useful life of the engine and airframe components.

Impairment of long-term assets - The Company reviews all long-term assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable through undiscounted future cash flows. If an impairment loss has occurred, such loss is recognized in the determination of net income.

Income taxes - The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on the difference between financial accounting and tax bases of assets and liabilities using enacted tax rates in effect during the years in which the differences are expected to reverse. An allowance against deferred tax assets is recorded in whole or in part when it is more likely than not that such tax benefits will not be realized.

Use of estimates - In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period. Actual results could differ from those estimates.

Fair value of financial instruments - Cash and cash equivalents, marketable securities, accounts receivable, and accrued liabilities are reflected in the financial statements at fair value because of the short-term maturity of these instruments. Management is not able to practicably estimate the fair value of the notes receivable from related parties due to the related party nature of the underlying transactions.

Income (Loss) per common share - The Company follows the provisions of Statement of Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS No. 128). SFAS No. 128 requires the presentation of basic and diluted earning per share. Basic earnings per share are calculated by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are similarly calculated, except that the weighted-average number of common shares outstanding includes common shares that may be issued subject to existing rights with dilutive potential. Potential common shares having an anti-dilutive effect on periods presented are not included in the computation of diluted earning per share.

Revenue and cost recognition - The Company utilizes the accrual method of accounting whereby revenue is recognized when earned. Air freight revenue is recognized upon delivery of cargo to its destination. Public services revenue consists of charter income, pilot training fees, and customer maintenance services. Charter income and customer maintenance services income is recognized when the service is performed. Pilot training revenue is recognized over the course of the program, based on the pro rata share of the course completed to date. The tuition revenue received, but not yet earned, is deferred and recorded as "refundable deposits" on the balance sheet.

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]

Recently Enacted Accounting Standards - Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements”, SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115”, SFAS No. 160, “Noncontrolling Interest in Consolidated Financial Statements” (as amended), SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133”, SFAS No. 162, “The Hierarchy of GAAP Sources for Non-governmental entities”, and SFAS No. 163, “ Accounting for Financial Guarantee Insurance Contracts” were recently issued. SFAS No. 157, 159, 160, 161, 162 and 163 have no current applicability to the Company or their effect on the financial statements would not have been significant.

Stock Based Compensation - The Company currently accounts for its stock based compensation in accordance with Statement of Financial Accounting Standards ("SFAS") No. 123 (as revised in 2004) "Accounting for Stock-Based Compensation." This statement establishes an accounting method based on the fair value of equity instruments awarded to employees as compensation. Equity instruments issued to non-employees are valued based on the fair value of the services received or the fair value of the equity instruments given up which ever is more reliably measurable. Beginning in February 2006, the Company adopted the Provisions of SFAS No. 123 as revised in 2004 which will require that options issued to employees as compensation be valued at fair value.

NOTE 2 - TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable consist of the following at:


	July 31, 2008
Trade accounts receivable	$	1,955,403
Less allowance for doubtful accounts		(19,390)
	$	1,936,013

^{Bad debt
(recovery) expense for the nine months ended July 31, 2008 and 2007 was $0 and
$(6,912), respectively.}

NOTE 3 - PREPAID EXPENSES

Prepaid expenses consist of the following at:


	July 31, 2008
Prepaid expenses and credits	$	909,739
Prepaid other taxes		228,204
	$	1,137,943

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - INVENTORIES

The composition of inventories is as follows at:


	July 31, 2008
Engine Work in Process	$	330,222
Aircraft Parts		1,394,375
Fuel Allowance		26,487 (47,489)
	$	1,703,595

NOTE 5 – PROPERTY, PLANT & EQUIPMENT

^{Property and equipment
consists of the following at:}


	^{Estimated life in years}	^{July 31, 2008}
^{Building and improvements}	^{10 - 40}	^$	^1,286,989
^Aircraft	¹⁵		^15,002,596
^Engines	^{7 - 10}		^7,679,072
^Equipment	^{3 - 10}		^214,515
^{Furniture and fixtures}	^{3 - 10}		^354,041
^Vehicles	^{5 - 7}		^119,994
			^24,657,207
^{Less: Accumulated depreciation and amortization}			^(8,357,629)
		^$	^16,299,578

Depreciation expense amounted to $1,602,371 and $1,403,757 for the nine months ended July 31, 2008 and 2007, respectively.

All of the Company's aircraft are held as collateral on various notes payable and related party notes payable at July 31, 2008 and 2007.

Sales/Leasebacks - In April 2004, the Company entered into a sale/leaseback agreement with a third party, wherein, the Company sold an aircraft for $650,000 and entered into an operating lease (See Note 6). The Company has recorded a deferred gain of $355,716 which will be amortized over the life of the lease as an offset to lease expense.

In June 2004, the Company entered into a sale/leaseback agreement with a third party, wherein, the Company sold an aircraft for $650,000 and entered into an operating lease (See Note 6). The Company has recorded a deferred gain of $517,929 which will be amortized over the life of the lease as an offset to lease expense. In addition, $80,000 of the proceeds from this sale is invested in a time deposit as collateral on the lease. These funds are recorded as a restricted time deposit on the Company's records.

In April 2006, the Company entered into a sale/leaseback agreement with a third party, wherein, the Company sold an aircraft for $675,000 and entered into a six month operating lease. The Company has recorded a gain on the sale of the aircraft during the second quarter of 2006 in the amount of $594,586. There is no continuing commitment on the part of the Company to continue the operating lease beyond six months. In addition, $95,000 of the proceeds from this sale are invested in a time deposit as collateral on the lease. These funds are recorded as a restricted time deposit on the Company records.

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – PROPERTY PLANT & EQUIPMENT (Continued)

Aircraft Dispositions - In January 2008 and May 2008 there were two separate incidents involving the Company’s aircraft. In both cases, the aircraft were damaged beyond repair or unrecoverable. However, both of the aircraft were insured and the Company does not expect either incident to have any material effect on operations or its financial position.

NOTE 6 - OPERATING LEASES

On March 20, 2001, the Company entered into a 30-year lease agreement with two five-year extension options for real property at the Provo, Utah Airport. The Company also leases a hangar in Billings, Montana at the Logan International Airport. The lease is for a term of five years ending October 31, 2012. These operating lease agreements contain scheduled rent escalation clauses based on changes in the consumer price index that are being amortized over the term of the lease using the straight-line method. In addition to the operating leases reported above, the Company has two revocable permits (month-to-month leases) with the State of Hawaii, Department of Transportation to use hangar and office space for its air cargo operations. The permits are renewed on an annual basis.

Future minimum lease payments for the years ending July 31, are as follows:


2009	$	24,625
2010		24,625
2011		24,625
2012		24,625
2013		11,673
Thereafter		129,959
	$	240,132

Total Rental expense for the period ending July 31, 2008 and 2007 was $134,400 and $135,309 respectively.

Aircraft - In April and June of 2004 and again in April of 2006, the Company entered into certain sale/leaseback agreements (See Note 5). The Company has agreed to lease two aircraft for sixty months. It has also agreed to lease a third aircraft on a month to month basis. The Company is also required to pay an additional amount to the Lessor based on the aircraft’s actual flight time. The Lessor is responsible for engine overhauls and maintenance on all leased aircraft.

Future minimum lease payments are as follows for the period ending July 31:


2009		187,000
	$	187,000

Total Lease expense for the nine month period ending July 31, 2008 and 2007 was $305,081 and $282,591, respectively.

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - RELATED PARTY TRANSACTIONS

The Company performed maintenance and certain qualified repairs on an aircraft owned by a related party. The Company charges the related party cost plus ten percent markup on all parts and a fixed rate of $55 per hour for labor. Total related party sales and cost of sales related to aircraft maintenance are as follows for the nine months ended July 31:


	2008		2007
Total related party sales	$	-	$	5,849
Total related party cost of sales		-		5,264
Gross margin on related party transactions	$	-	$	585

Personal Guarantee - The Company’s major shareholder/officer has personally guaranteed loans which are also collateralized by certain aircraft of the Company. (See Notes 5 and 9)

Aircraft Purchase - In December 2003, the Company acquired 16 aircraft from an entity related to an officer and majority shareholder of the Company for $9,900,000. The consideration paid included $9,104,000 in preferred stock of the Company's subsidiary Alpine Aviation, Inc. and the assumption of the underlying debt on the aircraft totaling $709,981. The remaining $86,019 is recorded as a payable to the entity related to an officer and majority shareholder of the Company. As the aircraft were purchased from a related party they have been recorded at their carryover basis of $4,111,485. A discount on preferred stock in the amount of $3,591,195, net of tax effect of $2,197,320, has been recorded and is being amortized as dividends over a five year period. The preferred stock provides for monthly dividends at an annual rate of 6.5%, and is not convertible. The Company can redeem the subsidiary's preferred stock any time and the entity related to an officer and majority shareholder of the Company can call for redemption of the subsidiary's preferred stock any time after December 31, 2011. During May 2007 Preferred Stock of the Company was exchanged for Preferred Stock of the Subsidiary (See Note 10).

NOTE 8 – LINES OF CREDIT

The Company has a single line of credit with a Lender. The balance, if any, would be reported as a separate line item in current liabilities on these financial statements. It is a $100,000 10-year revolving line initiated on August 26, 2006 and maturing August 25, 2016. Interest rate is at Lender's Prime plus 1% with a $0 balance on July 31, 2008. It is secured by the same four aircraft as Note payable in Note 9 below.

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – LONG-TERM DEBT

Notes payable arose from the purchase of aircraft during July 2003 [See Note 7], were subsequently refinanced and consisted of the following at:

July 31,

2008

^__________

Note payable issued August 28, 2006 for $1,936,193 due August 28,

2009. Interest rate of 9.5% at July 31, 2008. Secured by four Aircraft.

Reg #N-17ZV, N-194GA, N-955AA, and N-99GH.

Personally guaranteed by an officer/shareholder. $ 1,303,711

Lease Obligation issued July 31, 2007 for $6,000,000 due September 30, 2012.

Implied interest rate of 9.33%. Secured by seven Aircraft Reg#N95WA,

N24BH, N950AA, N99CA, N197GA, N127BA, and N192GA. 5,019,453

_________

$ 6,323,164

Less current portion (1,439,595)

__________

Long-term portion $ 4,883,569

__________

The estimated aggregate maturities required on long-term debt for each of the individual years at July 31, 2008 are as follows:


2009	$	1,439,595
2010		2,085,651
2011		1,275,536
2012		1,399,753
2013		122,629
	$	6,323,164

NOTE 10 – PREFERRED STOCK - SUBSIDIARY

The Company's subsidiary, Alpine Aviation, Inc., is authorized to issue 1,000,000 shares of preferred stock with a stated value of $9.104. At July 31, 2008, none of which are currently outstanding. The preferred stock provides for monthly dividends at an annual rate of 6.5%, and is not convertible. The Company can redeem the subsidiary’s preferred stock any time and the Holder can call for redemption of the subsidiary's preferred stock any time after December 31, 2008. Effective May 1, 2007 the Company became the Holder of 100% of the Preferred Stock of its subsidiary, Alpine Aviation, Inc. when it exchanged its own Preferred Stock in return for the Alpine Aviation, Inc. outstanding Preferred Stock. Due to the intercompany relationship, the Alpine Aviation, Inc. Preferred Stock is now eliminated in the consolidation process.

NOTE 11 – STOCKHOLDER’S EQUITY

Common Stock - The Company is authorized to issue 100,000,000 shares of $.001 par value common stock. As of July 31, 2008, 36,271,461 shares are issued and 36,200,801 shares are outstanding.

Treasury Stock – In June 2008, the Board of Directors authorized the Company to begin periodic purchases of common stock as blocks of stock became available. Initially, the Company purchased 70,660 shares, and may purchase more as available cash will allow.

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – STOCKHOLDERS EQUITY (continued)

Preferred Stock - The Company is authorized to issue 1,000,000 shares of $.001 par value preferred stock. In April 2007, the Board of Directors authorized the issuance of 1,000,000 shares of preferred stock with a stated value of $9.104 per share. At July 31, 2008, 880,000 shares are issued and outstanding. The preferred stock provides for monthly dividends at an annual rate of 6.5%, and is convertible at any time by the holder based on the current market price of the Company’s stock. The Company can redeem the preferred stock any time and the Holder can call for redemption of the preferred stock any time after December 31, 2011. Since November 2007, the Company has redeemed a total of 120,000 shares of the outstanding preferred stock at the value of $9.104 per share.

Stock Option Plan - In August 2001, the stockholders approved the adoption of an equity incentive plan. The plan allows the Company to issue incentive stock options (ISO's), non-statutory stock options and restricted shares to employees, directors, and consultants of the Company. Annually, commencing January 2002, the aggregate number of shares of the Company's common stock available for award under the plan shall increase by the lesser of 250,000 or seven percent of the outstanding stock less the number of shares previously authorized for the plan, respectively. As of October 31, 2007 and July 31, 2008 a total of 1,278,540 shares and 1,662,150 shares, respectively, of the Company's common stock have been reserved for issuance under the plan. After August 18, 2011, the plan terminates and no further options may be granted. The exercise price of options granted under the terms of the plan must not be less than 100% of the fair market value of the shares as of the date of grant. Additionally, no individual may be granted more than 100,000 options in any given year. All options issued under the plan are exercisable for ten years and vest after two years. The Company has not received and does not intend to request a determination from the Internal Revenue Service that the options issued under the plan will qualify under the Code for treatment as qualified incentive stock options.

The Company previously adopted the disclosure only provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (SFAS 123). During 2007 the Company issued options to purchase 425,278 shares of common stock to employees and directors. For the nine months ended July 31, 2008, the Company has issued 522,500 options.

The fair value of these 2008 options were estimated at the date of grant using the Black-scholes option-pricing model with the following weighted-average assumptions, an interest rate of four and 01/100 percent for the period ended July 31, 2008; expected life is ten years for the outstanding options. It is assumed that no dividends will be paid during the periods of calculation. At July 31, 2008, volatility is calculated to be one hundred twenty eight and twenty eight one hundredths (128.28), resulting in a respective weighted-average fair value per option of $0.29. Option pricing models require the best-input assumptions available were used to value the options and management believes the resulting option values are reasonable.

A summary of the status of the options outstanding under the Company’s stock option plans at July31, 2008, is presented below:


	July 31, 2008			October 31, 2007
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Outstanding at beginning of period	1,211,106	$	1.40	881,620	$	1.75
Granted	522,500		0.30	425,278		0.40
Exercised	-		-	-		-
Forfeited	71,456		0.43	95,792		048
Expired	-		-	-		-
Outstanding at end of period	1,662,150	$	1.09	1,211,106	$	1.40
Weighted average fair value of options granted during the year	522,500		0.30	425,278	$	0.40

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – STOCKHOLDERS’ EQUITY (CONTINUED)

A summary of the status of the options outstanding under the Company's stock option plans and employment agreements at July 31, 2008 is presented below:


Options Outstanding			Options Exercisable
Range of Exercise Prices	Number of Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$2.50- 2.75	556,620	3.2 years	$	2.53	556,620	$	2.53
$0.50 $0.40 $0.30	225,000 358,030 522,500	8.1 years 9.0 years 10.0 years	$ $ $	0.50 0.40 0.30	-0- 30,000 50,000	$ $ $	0.50 0.40 0.30
	1,662,150	7.25 years	$ 1.09		636,620	$ 2.24

NOTE 12 - INCOME (LOSS) PER COMMON SHARE

The following data show the amounts used in computing net income (loss) per common share, for the three and nine months ended July 31:


	For the Three Months Ended July 31,				For the Nine Months Ended July 31,
	2008		2007			2008		2007
Net income (loss) available to common shareholders	$	(421,235)	$	86,133	$		300,515		$	855,585
Weighted average number of common shares used in basic EPS		36,271,461		36,271,461			36,271,461			36,271,461
Dilutive effect of preferred stock Dilutive effect of stock options		26,705,067 636,620		18,238,000			26,705,067 636,620			18,238,000
Weighted average number of common shares and dilutive potential common stock used in diluted EPS		63,613,148		54,509,461			63,613,148			54,509,461

For the nine months ended July 31, 2008 and 2007, 1,662,150 and 1,294,772 outstanding options, respectively, were excluded from the calculation of diluted earnings per share because their effect was anti-dilutive. During December 2003 the Company issued 1,000,000 series A, 6.5% preferred shares of the Company's subsidiary Alpine Aviation, Inc. with a stated value of $9.104 per share, for the purchase of aircraft. These preferred shares have no voting rights and are not convertible into common stock and thus are not included in the calculations of earnings per share. During April 2007 the Company issued 1,000,000 series A, 6.5% preferred shares with a stated value of $9.104 per share. These preferred shares have no voting rights and are convertible into common stock at the current market value. They do have a dilutive effect and are included in the computation of EPS.

ALPINE AIR EXPRESS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – CONCENTRATIONS

U.S. Postal Service Contracts - The Company receives the majority of its revenues from contracts with the U.S. Postal Service (USPS). For the nine months ended July 31, 2008, and 2007, the revenues from contracts with the USPS represented 73% and 78% of total revenues, respectively. At July 31, 2008, and October 31, 2007, accounts receivable from the USPS totaled $1,101,762 and $1,257,995, or 57% and 61%, respectively. The contracts currently in effect for USPS routes will expire between July and November 2009 for mainland US operations and in January 2009 for Hawaii after a recent contract extension was granted. The loss of this customer would have a material negative effect on the operations of the Company.

NOTE 14 – COMMITMENTS AND CONTINGENCIES

Lawsuit - The Company has been named in a lawsuit by a former employee for claims of approximately $50,000 related to wrongful termination. The Company has made an offer to settle which was turned down. The plaintiff is not actively pursuing prosecution. The Company is in the process of petitioning to have the case dismissed.

Financing – On August 28, 2008 the Company entered into a financing arrangement with Chase Equipment Leasing Inc. in order to facilitate the purchase of 3 aircraft. The resulting note payable is in the principal amount of $4,000,000 and will be repaid over a 7 year term.

Preferred Stock – On August 14, 2008, the Company redeemed 40,000 shares of preferred stock at the stated prices of $9.104 per share.

The Company operates its aircraft under a certificate which allows it to accumulate time between overhauls (TBO) in excess of manufacturer's recommendations. The Company regularly inspects its engines. A majority of the engines used by the Company have accumulated TBO in excess of manufacturer's recommendations.

Item 2. Management’s Discussion and Analysis or Plan of Operation.

Plan of Operation

General

Alpine Air Express, through its operating subsidiary Alpine Aviation Inc. provides air cargo transportation services in the United States with flight activity in Colorado, Hawaii, Montana, Nebraska, North Dakota, South Dakota, and Wyoming. In addition to air cargo transportation, the Company flies charters for other cargo carriers, provides maintenance service on aircraft owned or operated by third parties, and operates a First Officer Training Program.

During the three months ended July 31, 2008, the Company carried over 2,841 tons of cargo as compared to 2,616 tons in the same quarter last year. This 8.6% increase in volume can be directly attributable to our new (March 2008) UPS contracts in Montana and to the increased volume of freight which is being carried in Hawaii.

The Company continues to experience significant rising costs in fuel and insurance. These costs along with the need to continue maintenance and repair of our aircraft place a strong demand on our cash resources. Management has been exceptionally proactive in containing and reducing operating and administrative costs in order to better maximize the use of cash resources in the face of escalating fuel costs.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Liquidity and Capital Resources

July 31, 2008 and October 31, 2007

The Company has a working capital position on July 31, 2008, of $2,268,120, as compared to $2,350,821 on October 31, 2007. This decrease in working capital of $82,701 is attributed primarily to a reduction in cash on hand and an increase in prepaid expense, which was nearly offset by reductions in accounts payable.

During the quarterly period ended July 31, 2008, we experienced a net loss before taxes and preferred dividends of $(152,873). This loss is a significant change from the $767,939 net profit for same period last year. The change is explained by both the nearly 100% increase in our fuel costs over the same period last year, coupled with the $(150,149) loss that was booked due to the loss of an aircraft in May 2008. We continue to take steps to manage and monitor operating expenses for all Company operations in order to continue improving profits. The Company continues to diversify its client base and better utilize its assets and operations.

The Company also continues to seek additional opportunities to expand their current flight and route schedule through new customers and additional cargo. We are also actively reviewing opportunities to acquire another carrier in order to further our expansion goals.

Results of Operation

Three months ended July 31, 2008 and 2007

During the quarter ended July 31, 2008, we had a net profit before taxes and preferred stock dividends of $(152,873) with a net profit available to shareholders of $(421,235) or $(0.01) per share. This compares to a net profit before taxes and preferred stock dividends of $767,939, with a net profit available to shareholders of $86,133 or less than $0.01 per share for the quarter ended July 31, 2007. Fuel costs, which increased nearly 100% over last year, combined with the loss on disposal of an aircraft, were the main factors in the net loss for the current quarter.

Revenue for the quarter ended July 31, 2008, was $5,102,181.This represents an increase in total revenue of approximately 15% from revenues of $4,441,218 during the same period in 2007. This increase in revenue is primarily due to the implementation of a new contract with UPS in Montana and to increasing freight loads in our Hawaii operations.

Total direct costs were $4,544,499 in the quarterly period ended July 31, 2008, as compared to $3,055,823 in the same period for the prior year. This increase in costs is directly attributable to increases in the Company’s cost of fuel, insurance, labor costs, and increased depreciation. As a single line item, fuel costs have increased nearly 100% from the same period last year. While fuel costs continue to increase, the Company continues to focus on cost containment in this area and has taken steps to reduce their costs of fuel in the future.

Operating expenses decreased from $471,392 during the quarter ended July 31, 2007, to $420,368 during the quarter ended July 31, 2008. These decreases were primarily associated with reduced travel and professional (consulting and legal) fees that the Company has incurred during the quarter.

During the quarter ended July 31, 2008 interest income increased by $1,028 from the same quarter last year due to the Company’s increase in cash available to earn interest. Interest expense was $150,666 for the current quarter, reflecting a decrease of 3% from the $155,663 of interest expense in the same period last year. This decrease is primarily due to reduced principal balances on long-term debt.

Off-balance sheet arrangements

We had no off balance sheet arrangements during the quarter ended July 31, 2008.

Forward Looking Statements

Statements made in this Form 10-QSB which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future

performance and business of the Company, including, without limitation, (i) our ability to retain existing commercial relationships and to obtain additional profitable sources of revenue, and (ii) statements preceded by, followed by or that include the words “may”, “would”, “could”, “should”, “expects”, “projects”, “anticipates”, “believes”, “estimates”, “plans”, “intends”, “targets” or similar expressions.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond the Company’s control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, in addition to those contained in the Company’s reports on file with the SEC: general economic or industry conditions, nationally and/or in the communities in which the Company conducts business, legislation or regulatory requirements, the economic condition of the U.S. Postal Service, changes in the air cargo, charter and leasing industries, demand for air cargo, charter and leasing services, competition, changes in the quality or composition of the Company’s services, our ability to develop profitable new sources of revenue, changes in accounting principals, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting the Company’s operations, services and prices.

Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. The Company does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Item 3(a)T. Controls and Procedures

Management’s report on internal control over financial reporting

As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our CEO and CFO concluded that information required to be disclosed is recorded, processed, summarized and reported within the specified periods and is accumulated and communicated to management, including our CEO and CFO, to allow for timely decisions regarding required disclosure of material information required to be included in our periodic Securities and Exchange Commission reports. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their

objectives and our CEO and CFO have concluded that our disclosure controls and procedures are effective to a reasonable assurance level of achieving such objectives. However, it should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. In addition, we reviewed our internal controls over financial reporting, and there have been no changes in our internal controls or in other factors in the last fiscal quarter that has materially affected our internal controls over financial reporting.

Changes in internal control over financial reporting

We had no changes in our internal control over financial reporting during the quarter ended July 31, 2008.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Alpine Air was named in a lawsuit by a former employee for claims of approximately $50,000 related to wrongful termination. We made an offer to settle which was turned down. The plaintiff is not actively pursuing

prosecution, and we believe the case may be dismissed for lack of prosecution.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Sales of Unregistered Securities

During the quarter ended July 31, 2008, we did not issue any unregistered securities.

Use of Proceeds of Registered Securities

We had no proceeds from the sale of registered securities during the quarter ended July 31, 2008.

Purchases of Equity Securities by Us and Affiliated Purchasers

SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES


Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may yet be Purchased Under the Plans or Programs
Month #1 May 1, 2008 through May 31, 2008	None	None	None	None
Month #2 June 1, 2008 through June 30, 2008	None	None	None	None
Month #3 July 1, 2008 through July 31, 2008	70,660	$0.45	None	None
Total	70,660	$0.45	None	None

Item 3. Defaults Upon Senior Securities.

None; not applicable.

Item 4. Submission of Matters to a Vote of Security Holders.

None; not applicable.

Item 5. Other Information.

(a)

None; not applicable.

(b)

Nominating Committee

During the quarterly period ended July 31, 2008, there were no changes in the procedures by which security holders may recommend nominees to the Company’s Board of Directors.

Item 6. Exhibits

(a) Exhibits and index of exhibits.

31.1 302 Certification of Eugene R. Mallette

31.2 302 Certification of Don T. Squire, Jr.

32 906 Certification

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant has caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.

ALPINE AIR EXPRESS, INC.


Date:	9/12/08	By:	/s/Eugene R. Mallette
			Eugene R. Mallette
			Chief Executive Officer and Director

Date:	9/12/08	By:	/s/Don T. Squire, Jr.
			Don T. Squire, Jr.
			Chief Financial Officer

Date:	9/12/08	By:	/s/Max A. Hansen
			Max A. Hansen
			Secretary/Treasurer and Director

Date:	9/12/08	By:	/s/Joseph O. Etchart
			Joseph O. Etchart
			Chairman

Date:	9/12/08	By:	/s/Kenneth D. Holliday
			Kenneth D. Holliday
			Director

Date:	9/12/08	By:	/s/Michael Brown
			Michael Brown

Director




Date:	9/12/08	By:	/s/Ronald L. Pattison
			Ronald L. Pattison
			Director

Summary
Research Report
Description
Watch this stocknew
Level 2 quotes
Charts
News
Profile
Balance Sheet
Income Statement
Cash Flow Statement
Insiders
SEC Filings
Analyst Recommendation
Earnings Report
Historical Prices
Recent Material Events
Key executives
Comments

Featured Videos

Feedburner

Full-text

You aren't logged in Log in Register

Home > Companies > Alpine Air Express, Inc. > Recent Material Events > Recent Material Event

Alpine Air Express, Inc. - Recent Material Event

More

Featured Videos